2018 (7) TMI 1773 - AT - Central Excise

Clearance of scrap of capital goods without payment of duty - appellant availed Cenvat credit of duty paid on such capital goods - Section 11A of the Central Excise Act read with Rule 3(5) of Cenvat Credit Rules, 2004 - scope of SCN - onus of proof - Held that - The Revenue neither in the show cause notice nor in the impugned order has anywhere referred to any entries in the RG-23 Part-II Register to substantiate their allegation that the assessee had availed the Cenvat credit - It is well established law that one who makes the allegation is required to substantiate the same with proof - Negative onus to show that the appellant had not availed the credit, cannot be placed upon the assessee. Time limitation - Held that - The demand is barred by limitation having been raised beyond the normal period as clearance of the scrap were on the basis of invoice and there was not any clandestine activity on the part of the assessee, in which case, longer period cannot be invoked. Appeal allowed on merits as well as on limitation.

Summary

Issues:
- Demand of duty on clearance of scrap of capital goods without payment
- Availment of Cenvat credit on capital goods purchased prior to 1994
- Confirmation of demand and penalty by Adjudicating Authority
- Rejection of appellant's stand by Lower Authorities
- Lack of evidence in show cause notice and impugned order
- Burden of proof on Revenue regarding Cenvat credit availed
- Barred by limitation
- Clearance of scrap based on regular invoices

Analysis:

The judgment by the Appellate Tribunal CESTAT ALLAHABAD involved a case where the appellant, engaged in the manufacture of sugar and molasses, faced a demand of duty amounting to ?3,02,068 for allegedly clearing scrap of capital goods without payment of duty. The proceedings began with a show cause notice dated 23/05/2011, claiming duty under Section 11A of the Central Excise Act and Rule 3(5) of Cenvat Credit Rules, 2004 for the period 2006-07 to 2009-10. The appellant argued that the scrap in question arose from non-cenvatable capital goods purchased before the introduction of Cenvat credit provisions in 1994, thus absolving them from the duty obligation at the time of clearance.

During adjudication, the Adjudicating Authority relied on a report from the jurisdictional Central Excise Superintendent, suggesting that the scrap, categorized as packaging material, might attract duty. Consequently, the Authority confirmed a demand of ?2,95,341.17 along with an equal penalty, a decision upheld by the Commissioner (Appeals), leading to the present appeal. The appellant contended that their submission of a list of pre-1994 capital goods was dismissed as unsubstantiated by the Lower Authorities, who also failed to prove the availed Cenvat credit on the capital goods in question.

The Tribunal noted that the Revenue did not provide any evidence in the show cause notice or the impugned order to support the allegation of Cenvat credit availed by the appellant. Emphasizing the principle that the burden of proof lies with the party making the allegation, the Tribunal found no substantial evidence indicating that the capital goods were subject to Cenvat credit. Additionally, the demand was deemed time-barred as the clearance of scrap was based on regular invoices without any fraudulent activity, precluding the invocation of an extended limitation period.

Ultimately, the Tribunal allowed the appeal on both merit and limitation grounds, highlighting the lack of substantiated evidence from the Revenue and the absence of clandestine behavior by the appellant during the clearance process.